U.S. home sales disappoint markets

Sales of previously owned U.S. houses unexpectedly fell in February, showing that the real-estate market is taking time to stabilize.

Purchases dropped 0.9% to a 4.59 million annual rate from a revised 4.63 million pace in January that was faster than previously estimated, a report from National Association of Realtors showed today in Washington. The median forecast in a Bloomberg News survey called for a rise to 4.61 million.

The Dow and S&P 500 drifted lower after the data came out, but losses in the Nasdaq were limited by Oracle Corp, which last night beat market expectations.

The glut of foreclosed properties is putting more homes on the market and creating a headwind for the industry that precipitated the last recession. Housing is struggling to gain momentum even as job and income growth, cheaper homes and mortgage rates near the lowest on record keep affordability near an all-time high.

“While beginning to improve, a strong, sustained recovery in the housing market, especially the important single-family sector, still appears to be a ways off,” Steven Wood, president of Insight Economics LLC in Danville, California, said before the report.

Estimates of the 77 economists surveyed by Bloomberg ranged from 4.44 million to 4.8 million after a previously reported 4.57 million pace in January.

Existing-home sales, tabulated when a contract closes, climbed to 4.26 million last year, from 4.19 million in 2010. Demand peaked at 7.08 million in 2005 during the housing boom. In 2008, sales totaled 4.1 million, the least since 1995.

Housing Inventory

The number of previously owned homes on the market rose to 2.43 million in February from 2.33 million the previous month, today’s report showed. At the current sales pace, it would take 6.4 months to sell those houses, up from 6 months in January.

The median price of a previously owned home climbed 0.3% to $156,600 from $156,100 in February 2011.

Sales of existing single-family homes decreased 1% to an annual rate of 4.06 million. Purchases of multifamily properties, including condominiums and townhouses, held at a 530,000 pace.

Purchases declined in two of four U.S. regions, led by a 3.3% drop in the Northeast. Sales in the Midwest increased 1%.

“We finished the year on a strong note, entered the year optimistic and still feel fairly optimistic today,” Larry Nicholson, president and chief executive officer at Ryland Group Inc., said March 6 at an investor conference in Orlando, Florida. “The good thing about the traffic we are seeing is it’s new traffic. We feel a lot better than we did a year ago. Hopefully, we can keep this trend up.”

Contract Cancelations

Today’s housing report showed contract cancellations were reported by 31% of the group’s members in February, little changed from 33% a month earlier.

Of all purchases, cash transactions accounted for about 33%, the same as a year ago. Distressed sales, comprised of foreclosures and short sales in which the lender agrees to a transaction for less than the balance of the mortgage, accounted for 34% of the total, little changed from 35% a month earlier.

Home foreclosures may be slow to wane in the coming months. Filings in the U.S. fell 8% in February, the smallest year-over-year decrease since October 2010, as lenders began working through a backlog of seized properties, RealtyTrac Inc. said last week.

“February’s numbers point to a gradually rising foreclosure tide,” Brandon Moore, RealtyTrac’s chief executive officer, said in the statement. “That should result in more states posting annual increases in the coming months.”

A total of 206,900 homes received notices of default, auction or repossession last month, down 2% from January, the Irvine, California-based data firm said in a report. One in every 637 households got a filing.

Investors

Investors accounted for 23% of purchases last month, while first-time buyers were 32% of the market, today’s report showed.

A measure of housing affordability a month earlier climbed to a record 206.1, according to the National Association of Realtors data. A value of 100 means that a family with the national median income has enough to qualify for a median-priced property.

Federal Reserve policy makers last week said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist and aimed at holding down borrowing costs like mortgage rates.

Getting Better

“Business is getting better gradually,” said John Huebner, owner of Century 21 Real Estate Professionals, a brokerage with 210 sales agents in Orlando, Florida. “People are moving and houses are selling, and that’s good for us.”

More people are searching for homes online, giving his brokers more leads on sales as shoppers seek to take advantage of low interest rates and prices, Huebner said.

“If homes are priced well and in good condition, we’re seeing multiple offers,” he said.

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